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Arbitration panel awards City of Buffalo $200,000 in Brand-On dispute

An arbitration panel awarded the city of Buffalo $200,000 following a dispute with the city’s former operator of Erie Basin Marina and the Hatch.

Comptroller Mark J.F. Schroeder said the award confirms the former operator was underpaying its rent, as detailed in the comptroller’s 2013 audit.

“This unscrupulous vendor thought they could get away with shortchanging taxpayers,” said Schroeder, whose audit identified the underpayments from 2005-2013. “Not on my watch,” he said.

But an attorney for the former vendor, Brand-On Services Inc., Monday said the arbitration award resulted from a miscommunication over gasoline fees between the city and its vendor. The contract states the city was to get 10 percent of revenue from gasoline fuel sold at the marina, but during the course of the contract, the city informally agreed to change that to 10 cents per gallon to ensure that the gasoline prices were competitive, said Brand-On attorney Mark S. Carney.

That change, however, was never brought before the council, as required under Brand-On’s city contract, so the arbitrator ruled – despite evidence of the informal agreement – that Brand-On owed the money to the city, Carney said.

The city comptroller’s office didn’t accept that Brand-On wasn’t aware it needed council approval to change the gasoline fee.

“They got approval from the council for other things,” said Patrick J. Curry, Schroeder’s executive assistant. “They didn’t know they had to go the council for something as serious as changing the rate?”

The other $44,000 due the city resulted from underpayment of base sales, including sales from the Hatch Restaurant and ship store, Schroeder said.

Brand-On acknowledged owing that $44,000 but said it reflected an error in calculation of rents owed, according to Carney.

“It was excuse after excuse of why they were ripping off taxpayers,” Curry responded.

The arbitrator also confirmed the city’s full ownership of floating docks at the marina.

Brand-On had a city contract to manage the Hatch and the Erie Basin Marina from 2001 until 2013. The city opted to seek new operators in response to Schroeder’s audit. The city also decided to separate the Hatch and Marina contracts, as Schroeder recommended.

A recently completed audit of the new operation found the Hatch paid the city $119,000 in rent in 2014, while the Marina operation showed a net loss of $30,400.

Rent from the Hatch – now operated by Mollyworld – was up 77 percent over the prior year, Schroeder said.

Under the city’s contract with Brand-On, Buffalo was guaranteed a minimum of $80,000 from both operations, Carney said. Brand-On used Hatch profits to offset Marina losses, Carney said.

But Curry said Brand-On didn’t always make the minimum payment. “In 2008, they didn’t pay anything,” Curry said. “There were $240,000 in deductions, only $100,000 which we thought were justified.”

The new operator of the marina, Smith Boys, took a loss this year, knowing the company will make money in the long-run, Curry said.

The goal, Curry said, is for the marina to become self-sufficient. To that end, boat slip fees are going up.

email:sschulman@buffnews.com

Susan Schulman – Susan Schulman is an investigative reporter at The Buffalo News, currently on the paper's Watchdog Team. Schulman joined the Buffalo News in 1985.